Bessent Makes His Case for Growth Over Debt-Cutting as U.S. Debt Tops $40 Trillion

Total U.S. public debt outstanding hit $40.047 trillion on August 18, split between $32.266 trillion held by the public and $7.782 trillion in intragovernmental holdings, according to Reuters. The milestone came just five months after debt passed $39 trillion, a sharp acceleration from the roughly two centuries it took to reach the first trillion in 1981. Interest on the debt now costs the government roughly $1.1 trillion a year, slightly more than defense spending, according to Al Jazeera.
Speaking with CNBC on August 20, Treasury Secretary Scott Bessent said global growth "is the way to take care of this mountain of debt," framing the issue as a growth problem rather than a spending one. He plans to bring the argument to G20 finance ministers and central bank governors in Asheville from August 31 to September 1. With debt near 122% of GDP and deficits around 6% of GDP, roughly 5% nominal growth (about 2.5% real growth after inflation) would be needed to hold the debt ratio flat — a pace the U.S. economy hasn't reliably sustained over the past decade.
Budget watchdogs pushed back, with Maya MacGuineas of the Committee for a Responsible Federal Budget calling the fiscal decline "predictable" and Margaret Spellings of the Bipartisan Policy Center calling the current path "plainly unsustainable," according to NPR. The 30-year Treasury yield climbed above 5.3% this week, its highest since April 2007, as the bond market continues pricing the growing supply of government debt. Treasury has also doubled the size of its long-dated debt buybacks to at least $4 billion.